With ruling of January 25th, the Court of Justice (CJEU) ruled on the consequences of the annulment of an unfair term in mortgage loan agreements and in particular on the limitations that an action for restitution may be subjected to.
The Provincial Court of Barcelona referred to the CJEU three joined cases dealing with the same circumstances. Consumers concluded mortgage loan agreements in the early 2000s with Spanish banking institutions. They were charged for the notarial and administration charges related to those contracts. All of them brought an action for annulment of the term by which they were charged before the court of first instance in Barcelona, after slightly more than ten years. The banks, instead, objected that the action was time-barred because of the ten-year limitation period established under Article 121-20 of the Catalan Civil Code. In all cases but one, the court rejected the plea of limitation (and ordered to pay back the sums) and the cases arrived on appeal before the Provincial Court of Barcelona, the referring court.
The case law of the Court of Justice does not exclude that an action for restitution may be subjected to some limitations: the question at stake is rather at which limitations.
In particular, the referring court asks whether Articles 6(1) and 7(1) of the Unfair Contract Terms Directive must be interpreted as precluding a judicial interpretation of national law according to which, after the annulment of the term like the one at stake, an action of restitution is subject to a limitation period of 10 years which starts to run from the moment the term exhausts its effects (i.e., when the last payment is made), without it being relevant that that the consumer is aware of the unfairness of that term and, ‘if so, whether those provisions must be interpreted as meaning that that knowledge must be acquired before the limitation period begins to run or before it expires’ (para 41).
To address the question, the Court begins by recalling its case law on limitation: provided that consumers are guaranteed equivalence effectiveness in the enforcement of the rights they derive from Directive 93/13 (i.e., it is not impossible in practice to exercise such rights), an action for restitution may well be limited in terms of time (see BNP Paribas Personal Finance, C-776/19 to C-782/19).
The case law concerning the limitation period at issue in the main proceedings, observes the Court, has established that to assess whether the consumers were given the possibility to exercise the rights conferred to them under EU law it must be evaluated the duration of the limitation period (ten years), and the ‘mechanism adopted to start the period running’ (para 46). For the starting period to be in compliance with the principle of effectiveness the consumer must have had the ‘opportunity to have become aware of his or her rights before that period begins to run or expires’ (para 48). Whenever, like in the cases at issue, the consumer lacks knowledge regarding the unfairness of the term – irrespective of whether the consumer is aware of the existence of the terms, the limitation period cannot begin to run. The legal assessment is thus decisive. The Court proceeds and states that not only must the consumer have knowledge of the rights he or she holds, but that he or she must also have ‘sufficient time to be able effectively to prepare and bring an action in order to assert those rights’. (para 50).
The Court thus ruled that Articles 6(1) and 7(1) of the UCTD must be interpreted as certainly precluding a judicial interpretation of national law which would allow the limitation period to start running prior to the consumer knowing that the term is unfair.
The question of the Catalan court comprised of a second part: is the condition relating to the consumer’s knowledge of the unfairness of the term fulfilled when there exists established national case law on the matter?
The Court answers the question negatively, by referring to the principle that is at the very core of consumer protection law, namely the asymmetry of information between consumers and businesses. While businesses, by virtue of their profession, are presumed to be highly informed including on the case law concerning the contracts and the specific term at issue, the same cannot apply to consumers ‘given the occasional, or even exceptional, nature of the conclusion of a contract containing such a term’ (para 60).
